Tether CEO Paolo Ardoino responded to Pablo Hernández de Cos, General Manager of the Bank for International Settlements, who stated at the Jackson Hole conference that stablecoins are insufficient for large-scale trusted payments, and that tokenized bank deposits are more suitable for everyday payments, suggesting that stablecoins should remain in specialized scenarios.

Ardoino broke down the structure: stablecoins are backed 100% by liquid assets like government bonds; tokenized bank deposits remain bank liabilities, typically uninsured, with liquid assets often having only about 10% fractional reserves. He claimed that the real concern of the BIS is not whether payments can be made, but that stablecoins reveal the "emperor's new clothes" of traditional banks.

He posed two questions: if there are full reserves, why do savings still need to go into fractional reserve products; and if the public perceives stablecoins as safer and moves their savings there, what will happen to the financial system? He referred to the current stage as the "verification phase."

The BIS argues for the singularity, elasticity, and completeness of currency: stablecoins cannot be frictionlessly exchanged at face value, platforms struggle to interoperate, and anti-money laundering controls are difficult to consistently embed. Tokenized deposits still operate under a dual currency system, with payments increasing or decreasing on bank ledgers, interbank settlements using central bank accounts, and credit functions remaining within the banking system.

The risks discussed by both sides are not the same. Issuers emphasize reserve ratios and liquid assets during a bank run; central bank networks stress uniformity of face value, lender of last resort, and credit creation. The 10% figure is his summary of fractional reserves, not a liquidity coverage ratio published by any specific bank. Tether's own reserve structure is primarily composed of government bonds, making it one of the largest issuers in the stablecoin market, but it lacks central bank backing and deposit insurance.

In market mechanisms, sellers are stablecoin companies that convert government bond reserves into safer currency, while buyers are central banks and commercial banks aiming to preserve the deposit-loan cycle. The event-driven aspect is the public discourse following the Jackson Hole conference. If funds migrate from bank deposits to fully reserved stablecoins, demand for government bonds will rise, and banks' lendable funds will decrease. Beneficiaries will be issuers in the government bond custody chain; those under pressure will be banks relying on demand deposits for lending and the regulatory agenda that seeks to confine stablecoins to a "special role."

Source: Public Information